SuperSports Inc.reported pretax
financial income of $260,000 for the year 2016. Taxable income of SuperSports
is however different from its pretax financial income because of the items
given below.

  • Depreciation deducted on the tax return is $40,000
    greater than the depreciation charged on Income Statement.
  • Estimated Warranties Expenses charged to Income
    Statement is $30,000 but Warranties expenses deductible on tax return are
  • $3,200 appear in the income statement of SuperSports as
    Fines and penalties paid.
  • SuperSports received $ 6,000 interest from Tax Saving
    Municipal Bonds.

Enacted Tax Rate for the year 2016
is 30% and for 2017 is 35%

Required: For the year 2016, SuperSports
Inc. requests you to:

  1. Identify items of permanent and temporary difference
    from the information given
  2. What items of temporary difference result in future
    taxable amounts and what items will result in future deductible amounts
  3. Compute Taxable Income
  4. Compute current income tax expense/Tax payable
  5. Compute deferred taxes ( Deferred Tax Liability and
    Deferred Tax Asset)
  6. Record journal entry for Income Tax Expense
  7. Show how deferred taxes will be reported in the Balance

Study Part B

SuperSports provides you the
following pension data for the year 2016.


Cost, 2016


Benefit Obligation, January 2016


assets (fair value), Januray 1, 2016


Service Cost – AOCI (2016 amoritization, $25,000)


Loss – AOCI (2016 amoritization, $10,000)


Return on Plan Assets


rate and expected return on plan assets


made to plan assets during 2016


SuperSports requests you to:

  1. Compute pension expense for the year 2016
  2. Record 2016 journal entry for pension expense